Study analyses impact of new US tariffs on textile-apparel

The recent US tariffs on Chinese imports seem to have direct implications for fabrics and yarns, says a Coresight Research study. Apparel and footwear are largely excluded from the tariffs, but they could be affected if those extend to additional categories. For example, Chico’s FAS and G-III Apparel Group, which source heavily from China, may be affected. The US fabrics industry is likely to benefit from the tariffs, given the steady stream of exports to China. Such exports increased from $351 mn in 2014 to $453 mn in 2017, according to the study.

Apparel accounted for three-fourths of the total imports in the apparel and textiles category in 2017, according to the International Trade Administration’s Office of Textiles and Apparel (OTEXA). That indicates that the apparel segment will be more impacted than the textiles segment, should the US proceed with levying tariffs on all Chinese imports.

Companies like The Children’s Place, which uses the ‘China plus Vietnam plus many’ sourcing strategy, are better positioned to absorb any costs that may result from future tariffs, the company said citing the study. China is the United States’ largest trading partner in the apparel and textiles category.

China accounted for 11-30 per cent of all apparel and footwear goods imported to the United States in 2018, down from 30-50 per cent earlier, according to a survey conducted by the United States Fashion Industry Association (USFIA). US trade in apparel and textiles with China is gradually declining. Given the new tariffs, Chinese imports of such products may decline further over the next few years as more US companies diversify their sourcing. Vietnam and Bangladesh have gained importance as sourcing destinations, with imports from both nations increasing since 2012, the study said. The US trade deficit with China in apparel is improving. It fell from $29.3 bn in 2016 to $28.4 bn in 2017.

The US has steadily increased its exports to China while reducing its import dependence on the country. The trend has been complemented by many US companies diversifying their sourcing to safeguard themselves. The company expects the US apparel and textiles trade deficit with China to narrow further. The deficit was down 1 per cent year-on-year in July 2018. From 2013 to 2017, the United States increased its apparel exports to China from $47 mn to $89 mn. Over the longer term, US companies are expected to further diversify their sourcing among China’s competitors. Among all apparel and textiles categories, the study expects yarn to be the most severely affected by the current tariffs.